Question

Why doesn't the make adjustments button let me exclude income from self-employment tax ?

Forum|Forum|3 years ago
March 8, 2023
1 reply
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am self-employed in a foreign country and have a certificate of coverage so I don't pay SE tax in US

TurboTax Self Employed Online

TurboTax will not let you exclude your self-employed income in a foreign country because your self-employment income is not excluded.

A certificate of coverage eliminates dual Social Security taxation. The situation occurs when an employee works in another country and is required to pay Social Security taxes to both countries on the same earnings. The certificate serves as proof that the employee and employer are exempt from the payment of Social Security taxes to the foreign country.

IRS Pub. 54, page 10 states, " If you are a self-employed U.S. citizen or resident, the rules for paying self-employment tax are generally the same whether you are living in the United States or abroad.

The self-employment tax is a social security and Medicare tax on net earnings from self-employment. You must pay self-employment tax if your net earnings from self-employment are at least $400.

For 2022, the maximum amount of net earnings from self-employment that is subject to the social security portion of the tax is $147,000. All net earnings are subject to the Medicare portion of the tax. Additional Medicare Tax may apply to you if your net earnings from self-employment exceed a threshold amount (based on your filing status)".

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S

squeakeroniAuthor

A certificate of coverage from the foreign country states that your self-employment income is subject to social security coverage in that country. So you are thus exempt from paying the self-employment tax in the US. So in this case I should be able to exclude this foreign-earned self-employed income from the self-employment tax using the adjustments button.

In the TT FAQ I found this :

You aren’t required to pay SE tax when any of the following applies:

You’re a member of a religious order that has taken a vow of poverty
You've requested, and the IRS has approved, an exemption from self-employment tax
You're subject only to the social security laws of a foreign country under the provisions of a social security agreement between the United States and that country

So my question is, is it possible to exclude this foreign earned income from the US self-employment tax on Turbotax ?

AmyC

Yes. Choosing to be exempt would be the easiest. You will need to go to the Business taxes and select Self-Employment Tax. You can enter the income being taxed as a negative number under non-farm and this will zero out your SE income and the tax.